EconomyBanking
Federal Bank posts record profit, up 45%, as PNB's earnings rise 13%
The Kerala lender's bad loans fell to ten-year lows and its margins widened. Punjab National Bank earned ₹5,532 crore as its bad loans shrank.
Key points
- Federal Bank's net profit rose 45.1% to ₹1,386.09 crore, its highest for any quarter.
- PNB's profit rose 12.8% to ₹5,532 crore on 10.8% growth in net interest income.
- Federal Bank's gross bad loans fell to 1.32%, the lowest in ten years.
Federal Bank reported the most profitable quarter in its history on Friday, with net profit up 45.1% to ₹1,386.09 crore for the three months to September, as the Kerala-based lender earned more on its loans and set aside less for bad ones. Punjab National Bank, the Delhi-based state-run lender, also reported higher earnings, with profit up 12.8% to ₹5,532 crore.
Federal Bank’s margins widen
Federal Bank’s net interest income, what it earns on loans minus what it pays on deposits, rose 26.4% to ₹3,153.40 crore, faster than its loan book, which grew 21.7%. Its net interest margin widened by 26 basis points to 3.32%, helped by a 40-basis-point fall in its cost of funds. Deposits now cost it 5.18% on average.
Operating profit rose 35.4% to ₹2,225.37 crore.
The quality of its loans improved sharply. Gross non-performing assets fell to 1.32% of loans and net NPAs to 0.17%, both the lowest in ten years. Fresh slippages into bad loans were down 27%, and the bank has set aside provisions covering 87% of its bad loans.
Chief executive KVS Manian said the bank’s total business had crossed ₹6.4 lakh crore and its advances ₹3 lakh crore. “The growth is coming from the core,” he said, referring to the bank’s mainstream lending and deposit business rather than one-off gains.
Federal Bank’s shares closed little changed at about ₹337 on Friday.
PNB’s bad loans shrink
At Punjab National Bank, net interest income rose 10.8% to ₹11,601 crore and operating profit was up 4.2% at ₹7,532 crore. Fee income grew 16% to ₹1,954 crore from ₹1,685 crore a year earlier.
The bank’s gross non-performing assets fell by ₹6,153 crore over the year to ₹34,190 crore at the end of September, and net NPAs dropped by ₹713 crore to ₹3,313 crore.
Lending to farmers and small businesses grew fastest. Agricultural advances rose 18.1% to ₹1,71,156 crore and loans to micro, small and medium enterprises grew 19.8% to ₹2,14,619 crore. For the first half of the financial year, PNB’s operating profit was up 5.2% at ₹15,051 crore.
The bank also became more productive by its own measures: business per employee rose to ₹30.66 crore from ₹27.62 crore, and profit per employee to ₹22.51 lakh from ₹19.97 lakh.
Big banks report on Saturday
The two results come a day before the country’s largest private lenders report. HDFC Bank, ICICI Bank, Axis Bank and YES Bank are all due to announce their September-quarter numbers on Saturday, and analysts at JM Financial expect margins at ICICI Bank, Axis Bank and Kotak Mahindra Bank to narrow by 14 to 18 basis points from the previous quarter.